Florida PIP Reforms Reduce Hikes But Not Many Premiums Thus Far

Florida regulators are optimistic that the state’s no-fault auto reforms are having a positive effect on the market and will eventually cut premiums for drivers. But for now they are telling the public that the recent law changes will likely only temper the size of insurers’ personal injury protection (PIP) rate requests as opposed to actually decreasing drivers’ premiums.

Florida Insurance Commissioner Kevin McCarty said that regulators are just beginning to review the 100 plus filings made by insurers by the Oct. 1 deadline.

So far, only eight companies have received rate approval. The early results follow an expected trend whereby rate requests are lower than otherwise would have been filed.

While these savings will not be felt directly by policyholders, regulators remain confident that the market is heading in the right direction.

“Although it initially appears the savings will result in a mitigation of rate increases rather than actual rate reductions for most companies, it does represent a major shift in the trajectory of PIP insurance rates in Florida,” said McCarty in a statement.

Out of the eight filings approved by regulators, four insurers received approval for PIP rate increases ranging from 26.3 percent to 3.9 percent. In every case, however, the rate requests are lower than they would have been prior to the PIP reforms.

For example, the Florida Farm Bureau Insurance Co. requested an eight percent increase as opposed to the 45 percent the company said it otherwise would have filed. MGA Insurance Companies, for both its renewal program and personal auto program, requested a 3.9 percent increase in its PIP rates as compared to an average 15 percent increase. Agency Insurance Co. reduced its rate request from plus 60.9 percent to 26.3 percent.

Three companies did receive PIP rate decreases: United Fire and Casualty Co., at a minus 15.2 percent, Hartford Insurance Co., of the Midwest’s renewal program at minus 4.7 percent, and Philadelphia Indemnity Insurance Co., which received a 10 percent rate reduction for is collector vehicle program.

Florida Insurance Consumer Advocate Robin Westcott said she was disappointed that some of the insurers requested increases as opposed to the 10 percent decrease targeted in the law. She said her office is reviewing the filings, but urged regulators to scrutinize the filings and make sure the increases are fully justified.

“These insurers must be held accountable,” Westcott said in a statement. “Floridians deserve the full benefit of the reforms the legislature fought so hard for.”

In August, at the state’s request, Pinnacle Actuarial Resources Inc. issued an analysis that said the no-fault law changes should eventually translate into premium reductions on average between 14 percent and 24.6 percent.

The next round of mandatory PIP rate filings is due on Jan. 1, 2013, and regulators expect that will represent a fuller picture of the influence of the reforms on the market.

Lawmakers required every auto insurer to make a filing as of Oct. 1 reflecting a 10 percent reduction in the PIP portion of its rates or provide a detailed reason why it is unable to do so. A similar provision kicks in on Jan. 1, 2013, but for a 25 percent PIP rate reduction.

The rewrite of the state’s automobile no-fault law encompassed everything from medical fees, litigation costs and instituted a bifurcated benefit system. Accident victims are now required to report an auto-related injury and seek treatment within 14 days. Injured drivers can receive up to $10,000 in benefits for emergency medical care and $2,500 for other less serious injuries.

The new law also contains a host of anti-fraud measures and changes in attorneys fees. It also requires PIP clinics to become licensed and limits the types of medical providers who are eligible to receive PIP payments.

Insurers may be reluctant to make deep cuts in their PIP rates because they want to see whether the law can withstand legal challenges. A group of health care providers filed suit in Leon County Circuit Court arguing the law is unconstitutional. The case centers on a decision by lawmakers to eliminate licensed massage therapists and acupuncturists from the list of approved PIP providers while setting a medical fee schedule based on Medicaid. In addition, the $2,500 benefit limit for non-emergency services will result substantially decrease chiropractor fees.

According to an Insurance Consumer Advocate report based on the meetings of a working group, those three categories of providers represented the three highest average medical fees per PIP patient.

The suit charges that those statistics are “devoid of any type of competent, substantial evidence” and the new law is putting some of these providers out of business.

The suit also charges that requiring drivers to seek treatment for an accident within 14 days or lose their rights to PIP benefits is arbitrary and not medically justified. The same rationale holds true, the suit charges, when it comes to reducing benefits for non-emergency room care.